Back in June, Andrew Tyrie, the Chair of the Treasury Select Committee, wrote to the UK Financial Conduct Authority (FCA) asking how it addresses the risks and opportunities presented by peer-to-peer (P2P) lending and "related markets."

Tyrie asked where responsibility lies for ensuring accurate information is conveyed to investors, whether platforms have sufficient incentives to assess how creditworthy borrowers are, how well consumers understand risks associated with investing, and what impact the industry has had on competition in the UK financial services industry so far.

FCA's response to Tyrie's questions was published last week, the same day the UK announced its first interest rate cut in seven years. This is particularly timely, as the rate cut may end up being a driver behind new growth in the alternative finance industry, as outlined in last Friday's briefing.

Responsibility f0r accuracy of information lies squarely with firms. FCA said that since October 2014 it has considered 37 cases of P2P and investment-based promotion, of which 21 were amended or withdrawn for breaking guidelines. FCA's hard line on misleading promotions is especially important — falling interest rates will drive a decline in the interest rate paid on bank accounts, which could drive savers to explore P2P lending as an alternative way to earn interest income.

Firms have regulatory incentives to ensure creditworthiness of borrowers. P2P lenders must abide by the same rules as legacy lenders when it comes to assessing borrowers' creditworthiness. Firms also voluntarily publish their loan books meaning they have a commercial incentive to ensure creditworthiness of borrowers — if books showed a default rate, potential investors would be put off, while existing investors would likely withdraw funds.

FCA has its own concerns about consumer understanding of risk. There is some evidence that FCA and Tyrie are right to be concerned — 37% of UK consumers who are aware of P2P lending think it is either equally risky, less risky, or are unsure of its risk relative to savings accounts. Savings accounts are covered by deposit insurance while all capital invested via P2P lending is at risk.

FCA admits crowdfunding is a small industry but has faith it will grow. FCA expects P2P lending and other crowdfunding models to result in a growing choice of finance providers. We think this may be optimistic and that as banks acquire new technology enabling them to compete with alternative lenders, we will actually see consolidation in the industry.

FCA launched a planned review of its policy on P2P lending and other alternative lenders in order to assess risks to consumers in July, which will likely take into account the Select Committee's concerns. If it decides new regulation is required, a consultation paper will be published later this year.

The results of the review may also affect the future of the Innovative Finance Individual Savings Account (IFISA) which allows consumers to invest in P2P lending tax free. If FCA decides consumer understanding of risk is not sufficient, the initiative could be halted. This would prove a double blow to P2P lenders — more regulation and one less channel for attracting capital.

Fintech regulations in the U.S. have been extremely restrictive thus far, but those in Europe have proven successful and allowed the region to become a hub of financial technology innovation. The U.S. would be wise to examine the policies in place across the pond and consider how to implement similar ones within its own borders.

The fintech industry is booming, with VC-backed fintech investment growing 106% to reach £10 billion ($13.8 billion) in 2015. But the new business models fintechs are bringing to market also need to be regulated, and the old models aren't sufficient. The approach regulators take will have a significant impact on how big fintech gets and how fast it gets there.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it's becoming a model for regulators around the world.

Here are some of the key takeaways from the report:

The financial technology sector is booming, and Europe is a leading region for growth. VC-backed fintech companies in Europe raised £1 billion ($1.5 billion) in funding across 125 deals in 2015.

With this boom in funding comes a need to regulate the nascent industry. There are a variety of approaches — active, passive, and restrictive — that regulators can take. The EU and the UK, in particular, have taken an active approach, in order to encourage growth.

The regulation that will have the most impact on the European fintech market is the Second Directive on Payments Services, known as PSD2. It will force banks to open up their systems to fintechs. This will allow fintechs to act as intermediaries between banks and their customers.

The UK regulator is actively promoting its approach to regulation as a model for other countries to follow. Some of its innovations are already being copied by other regulators around the world.

In full, the report:

Examines the different approaches to fintech that regulators can take

Explains the key EU laws that will affect the European financial services industry in the next two years and beyond

Explores the potential impact of new regulations

Details the workings of the initiative central to the UK regulator's approach to fintech

Highlights what can be achieved when regulators, governments, and fintech companies work together

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The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of fintech regulation.